The ELAN Law: What are the consequences for furnished rentals?

After a year of debate the ELAN law, development of housing, planning and digital is in the final stages of its legaslatif process. Voted for by the National Assembly last October 3rd, the text will be fully adopted by the Senate on October 16th. As this new legilsation comes into effect, what will be the consequences for furnished rentals? With Lodgis, this is a return to two principle values, lease mobility and rent control.


Acknowledging mobility


The mobility lease has finally been approved. Designed for professionals and students moving about, the tenancy will last between 1 to 10 months, non-renewable. Without a deposit, this contract type can be attached to a Visale guarantee, the Action Logement guarantee, although guarantee does not yet cover deteriorations from renting. "The introduction of this new contract is in recognition of the movement undertaken by students and professionals alike. It was important to give a legal framework defining the rights and obligations of both tenant and landlord," states Maud Velter, Associate and Legal Director of Lodgis.

Though the mobility contract cannot be renewed it can be the subject of an amendment to adjust the tenancy length, though this still may not exceed 10 months. If the tenant needs a contract for a longer tenancy period they can benefit from a standard furnished rental contract as primary residence for a length of one year, or in the case of students, 9 months.


The return of rent control


Rent control, voided by the Administratif Tribunal a year ago in Lille, then in Paris, makes its return with the introduction of the ELAN law. Rent control can be applied after the appropriate authorities* apply to the reeve for an experimental period of 5 years. The reeve can only approve the request under certain conditions: there needs to be a significant difference between the average rental cost in the private and public sector, a higher average rent, a low rate of accommodation under construction, and limited prospects for production.

"Rent control is, above all else, a political measure. In short, this will not help tenants to lodge more easily in strained real estate markets. Furthermore, in strained markets, there is already a rent control to adhere to in the case of a new tenancy or a renewal of the contract. Rent can only be revised in alignment with the benchmark of rents, which allows control over the development of rents in towns where there is a strain in the rental market," underlines Maud Velter. "If professionals respect this rent contol upon relocating, individuals are perhaps less well informed about the regulatation," highlights Maud Velter.

There remain still some inaccuracies that have not been addressed by the ELAN Law. Rent supplements remain unclear. In the case of furnished rentals, services and equipments are included as are the features and the location of the property, but no real specification of elements included has been given. "The ELAN Law has not corrected this failure to fully define rent terms, which opens up the risk for disputes," precises Maud Velter.

Furnished rentals are largely recognised under the ELAN Law with the introduction of the mobility contract. As the rate of furnished rentals increased from 3.5% in 1980 to 8.5% in 2012, the continued increase of mobility levels, and the implementing of the mobility contract will only increase the attractiveness of this type of rental for landlords.


Sanctions against tourist rentals are reinforced


Another important component of the ELAN Law concerns furnished tourist rentals. Sanctions against landlords, and platforms for tourist rentals, that don't respect the regulations in place have been increased. From now on, any landlord who has not registered their tourist property in an area where this is obligatory can face a €5000 fine (compared to the current €450.)
The law also states that in areas where it is possible to change the status of the property's use, a landlord is not able to rent out their primary residence for more than 120 days within the same year, except for professional reasons, health reasons, or another serious reason where this becomes unavoidable. If they exceed 120 days of renting per year, without just cause, the landlord may face a €10 000 fine. They may also face this fine if, after being asked to provide information of tenancy dates, the landlord takes longer than a month to provide proof to the council. As for rental platforms, they are obliged to restrict the rental periods possible to 120 if the landlord has declared the property as their primary residence.
Failure to implement this restriction allows the rental platform to face a €50 000 fine per property. Finally, in communes where a tourist rental needs an advance notice registered, any platform not mentionoing the registration number in their advertisements risk €12 5000 in fines per property. "These measures, all together, should prove effective enough to dissuade landlords from undertaking tourist rentals without the proper authorisation. In large towns, the number of properties designed for traditional furnished rental or for mobility contracts, should increase in order to meet this demand which continues to increase," concludes Maud Velter.



* EPCI (Public institution of intercommunal cooperation) has jurisdiction over habitation matters in the commune of Paris, the institution of public territories of the metropolis of greater Paris, the metropolis of Lyon and the metropolis of Aix-Marseille-Provence.



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